Carefully investing in foreclosure properties
The slowing real estate market has been coined “bad” by most of the public. From low sales to rising interest rates, the market has been difficult for both buyers and sellers. But investors have found out that there is a way to profit in just about any market, you just have to choose your options wisely.
Well, the cat’s out of the bag, as the next best investment has been revealed in numerous articles and reports; foreclosure flipping. Foreclosure flipping requires investors to purchase foreclosed homes at a heavily reduced price and then attempt to quickly sell them for a substantial profit.
Kathleen Doler’s article, “Rising Foreclosure Rate Lures Investors,” posted on Yahoo! News on October 5, 2006, explains that although foreclosure investing can prove to be a lucrative venture, it does have many dangerous pitfalls to be aware of.
“For the past few months, analysts nationwide have been touting foreclosure opportunities, in which investors, eager for properties to flip or rent, try to buy them well under market. Though foreclosures have picked up, analysts tracking the trend say the bulk of distress sales are likely in 2007 and 2008, as many adjustable-rate mortgages reset.”
Although many predictors expect the market to produce a higher number of foreclosure opportunities in the next year or two, it does not mean this is a guaranteed premonition.
After 17 consecutive rate increases by the hands of the Federal Reserve, mortgage rates have been slowly but steadily declining over the past couple of months. With the fear of rates reaching 7.0 percent at the end of July 2006, rates have now dipped around 6.3 percent. As a result, many more people who are struggling to make monthly mortgage payments will be able to refinance at a reasonable rate, thus saving their home and preventing one more foreclosure from reaching the market.
Still, dedicated, savvy foreclosure investors should be able to find rewarding deals all over the country.
“‘Buying foreclosures has made a lot of people rich, in good real estate markets or bad,’ San Francisco Bay Area real estate agent John Nazareno said in an e-mail interview.”
“The quarters ahead will likely bring modest increases in delinquency and foreclosure rates, according to a September report by the Mortgage Bankers Association. The MBA says only 16.5% of homeowners have adjustable-rate mortgages. The remaining 83.5% either own their homes outright or have fixed-rate mortgages.”
Just like when new, specific markets emerge as profitable for buyers or sellers, the same can be true for foreclosure investors.
“In general, foreclosure specialists say, the high-growth real estate markets of the past few years -- South Florida, the Denver area and Southern California -- are likely to see higher foreclosure rates.”
Other than the obvious task of finding a financially beneficial property to invest in, foreclosure investors must also be careful to avoid obvious pitfalls that can accompany these properties, such as corrupted titles or backed tax issues.
Foreclosure opportunities allow investors to profit even in the slowest real estate markets. But greedy investments can result in the inability to flip the property, thus leading to yet another foreclosure.
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